Andrea Iannelli (Fidelity) | Central banks have again become the protagonists in the quarter which has just ended. A generalised movement towards more expansionary positions, with the Federal Reserve in the lead, supported risk tolerance and lifting all kinds of assets, reversing the poor returns registered in 2018.
Pablo Pardo (Washington) | If in any country the word “socialist” is an insult, it is in the US of 2019. “Socialism” has become the war cry of the Republican party against the opposition Democrats, who control the House of Representatives, in large part because the media star of this party in the Congress, Alexandria Ocasio-Cortez, describes herself as a “democratic socialist”.
Pablo Pardo (Washington) | Donald Trump could nominate Herman Cain, an eccentric businessman who has accumulated various scandals and a questionable economic baggage, as a board member of the Federal Reserve. Cain is famous for having directed the El Padrino pizza chain and also for having been a senior executive at Burger King.
Pablo Pardo | With his trade war, Trump has accelerated the slowdown in China, and now the world´s second economy is buying fewer goods and services from the US. And from the rest of the world in general. Not only Apple has declared that its profits are going to be reduced by China´s slowdown. Also, for example, its main rival outside China, Samsung.
The Federal Reserve is more or less protected from the demands of political parties. But what about the influence from ‘special interest groups’ such as the banking industry on Fed policymaking? “There is hardly be any doubt that the Fed caters, first and foremost, to the needs of commercial and investment banks, ” says a report from Degussa.
The Federal Reserve raised its benchmark interest rate by 25 basis points. The effective rate will evolve in a corridor between 2% and 2.25%. The dots graph reflecting monetary policy committee members’ expectations suggests 3 rate increases in 2019, 1 in 2020 and none in 2021. As pointed by Philippe Waechter from Natixis IM, this profile, for 2019 and 2020, is unchanged from last June forecasts.
Benjamin Cole | Fed Chair Jerome Powell has stated the Fed’s 2% target is symmetric, which may be code words for “inflation a little above 2% is tolerable.” The US central bank may find fighting inflation resembles heart surgery with a chainsaw.
Ignacio de la Torre | The ECB’s deposit rate, which is now at -0.4%, will move to -0.2% during 2019 and later to 0%. At the same time, during the second half of 2019 the logical thing is for the ECB to begin to raise interest rates. These two factors should fuel a progressive rise in the Euribor from the summer of next year.
In his first press conference, Jerome Powell baffled both the experts and the markets. After reading the hawkish introductory statement, he defused all fears for a harsh and swift monetary tightening.
We need to be aware of the existence of regulations over and above the well-known Taylor Law, starting with this regulation adjusted to establishing a downward limit on rates of 0%, which is very important in the US Fed’s case.